BIR Ruling [DA-261-03]

August 11, 2003 BIR RULING [DA-261-03] 24 (D) (1); DA 145-00 Mr. Jose Mari P. Fernandez No. 2 Jones Street Filinvest East Subdivision Cainta, Rizal S i r : This refers to your letter dated June 20, 2003 requesting for a ruling as to whether the Deed of Exchange executed by you and Rosita F. Gomez relative to the swapping of real properties in order to correct a mistake and without any monetary consideration is not subject to capital gains tax and documentary stamp tax. It is represented that you are the absolute and registered owner of a parcel of land together with the improvements thereon located in San Juan, Metro Manila covered by TCT No. 9699-R issued by the Registry of Deeds for San Juan and containing an area of 56.40 square meters; that on the other hand, Rosita F. Gomez is the registered owner of a parcel of land located in San Juan, Metro Manila covered by TCT No. 9710-R and containing an area of 59 square meters; that both of you erroneously built your respective houses on the aforementioned lots believing that you and Rosita F. Gomez own the above-mentioned lots, respectively; and that to rectify the error committed, both of you have mutually agreed to exchange your respective properties by virtue of a Deed of Exchange in order to correct the mistake committed by sheer oversight and inadvertence by simply swapping your respective titles to the properties without any monetary consideration. In reply thereto, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the purpose of correcting the mistake above-described, the exchange of realties by you and Rosita F. Gomez is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. Moreover, the said swapping of real properties are not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the said Deed of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. (BIR Ruling No. DA 145-00 dated March 10, 2000) . This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service